Founder's response to the sharp decline in the price of Terra, the third largest stable currency

　　 The third largest stable currency in the world Terra USD Decoupling from the dollar on Monday , At one point the price fell to 69 Low cents , It led to a large number of investors selling their assets . Things got better on Tuesday , But early Wednesday Terra The price fell to 40 Less than cents , Caused widespread panic . In response to this crisis ,Terra founder Do Kwon Tweet that ：“ To announce UST Your recovery plan . hold one's own .”

　　 according to the understanding of ,Terra Is an algorithm designed to maintain a one-to-one peg to the US dollar . And a stable currency backed by cash and assets to maintain value （ Such as Tether and USD Coin） Different , Algorithmic stability currency has no asset support , Instead, it maintains value through an arbitrage relationship with another cryptocurrency .

　　 With Terra For example , If the price is lower than 1 dollar , Traders can convert this currency into a currency called Luna The cryptocurrency of . Improve by reducing supply Terra The price of . contrary , If Terra Price over 1 dollar , Traders can put Luna To exchange for Terra, In order to make sure Terra And 1 Dollar peg .

　　 But this mechanism has not worked in the past few days . The algorithm relies on traders to push prices back 1 dollar , If traders are unwilling to buy , This currency will fall into “ Death vortex ”.

　　Do Kwon Has been diversifying bitcoin reserves to support the value of stable coins , But if bitcoin depreciates as it has in the past six months , It may be difficult to provide protection for a stable currency .

　　 Tuesday local time , U.S. Treasury Secretary Yellen said at a hearing of the Senate Banking Committee , I hope Congress will authorize the supervision of the so-called stable currency . Yellen said ：“Terra Experienced a round of decline . I think this shows that this is a fast-growing product , Risks are also growing rapidly . We really need a consistent federal legislative framework .”

editor ： Zhang Jingdi